TDS is not applicable to the Mahila Samman Savings Scheme interest amount

The CBDT notified that Tax Deducted at Source (TDS) would apply to the Mahila Samman Saving Certificate Scheme as per Section 194A of the Income Tax Act, 1961. Under Section 194A of the Income Tax Act, TDS is deducted on interest received from the post office savings scheme in the financial year when it exceeds Rs.40,000 or Rs.50,000 (for senior citizens).

The Mahila Samman Saving Certificate Scheme, a post office savings scheme announced by the government in Budget 2023, is a scheme for women and girls. Women can invest a minimum of Rs.500 and a maximum of Rs.2 lakh. It offers an interest rate of 7.5% p.a. The maturity tenure of the scheme is two years.

Thus, when a woman invests the maximum amount of Rs. 2 lakh in the Mahila Samman Saving Certificate Scheme for two years at 7.5% p.a., the interest income from the scheme will be Rs.15,000 in the first year and Rs. 32,000 in the second year. Since she gets an interest below Rs.40,000 under this scheme, TDS will not be applicable to the interest income received.

Though TDS will not apply to interest earned from the Mahila Samman Saving Certificate Scheme, the interest income would be added to the total income of the women for tax calculation purposes. Additionally, the investment made in this scheme does not qualify for any tax benefits under Section 80C of the Income Tax Act. Thus, the interest earned under this scheme would be taxable depending on the taxpayer’s applicable tax slabs.

The Mahila Samman Saving Certificate Scheme is available only for two years, i.e. up to 31 March 2025. A woman can invest in this scheme between 1 April 2023 and 31 March 2025. Investment in this scheme will not be allowed after 1 April 2025 unless the government extends the date.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@clear.in